Divestment Creates Positive, Systemic Change

By Guest Contributor

Divestment is a tool that is best used as part of a broader movement towards a real-world goal. My goal is to keep the global temperature from rising two degrees Celsius above the pre-industrial temperature, an increment that was about the only thing global leaders could agree upon at the Copenhagen Summit. In the 1980s, activists had the goal of ending Apartheid in South Africa, and used divestment as a tool to do so.

Next it is important to consider how businesses are related to the given goal. Will divestment be an appropriate tool towards that goal? In the 1980’s, U.S. companies were doing business in South Africa, supporting and profiting from the Apartheid regime. In facing climate change, fossil fuel companies have a vested interest not only in extracting and selling five times the amount of carbon as will raise the global temperature two degrees, but also in funding climate-change-denying science and lobbying against climate change legislation.

When investors do remove their money from the culpable companies, or divest, it must be a widespread action. Admittedly, one shareholder’s divestment will not significantly impact the company — the shares will simply be sold to another investor.  But if a large cohort of investors across the country, or even across the globe, mobilizes to divest, than the value of the company’s shares could drop and the company could begin to lose its financial stability. Perhaps more important are the social and political impacts of broad scale divestment. When divestment is used in concert with boycotts, lobbying, political pressure, civil disobedience and widespread media coverage, the companies can be stigmatized so that they change their business practices, they lose their political power or the public consumes less of their product.

In the case of South Africa, the divestment movement included more than 55 colleges and universities, 26 U.S. states, 22 counties, 90 cities and many religious organizations and pension funds. The divestment movement caused 200 U.S. companies that had been supporting the Apartheid regime to cut their ties with South Africa. But change in those businesses was not the ultimate goal — rather it was an important tool used in conjunction with a broader social movement towards ending Apartheid. Governments issued sanctions against the regime, human rights organizations lobbied and activists in South Africa and around the world rallied against the regime. When Apartheid officially ended in 1994 with the election of Nelson Mandela, he specifically cited divestment and the withdrawal of U.S. companies as key factors in the end of Apartheid.

The movement against climate change is on a similar track. Students at more than 40 campuses are already pressuring their administrations to divest from fossil fuel industries. Climate change is the target of countless environmental and human rights groups, international agreements and coalitions of reputable scientists. Businesses in renewable energy, efficient technology and green buildings work to reduce fossil fuel consumption. Thousands of activists through organizations like 350.org mobilize to raise awareness of the urgency of climate change.  In other words, there is a broad and multidimensional social movement against climate change. But through lobbying and campaign contributions, fossil fuel companies are effectively preventing more rapid and systemic change. Additionally, it is not just the industry’s spending practices that are the problem. Rather it is their inherent business model. The fossil fuel industry is so big and so profitable that even a widespread divestment movement will probably not keep it from selling 80 per cent of the reserves it has discovered. But divestment could easily be the catalyzing force in separating our politicians from fossil fuel interests, in demanding climate change policy, in ending fossil fuel subsidies and in exciting the public to a new degree of urgency in reducing its carbon consumption. Divestment from fossil fuels, coupled with social pressure against the industry, will work within the broader social movement to keep climate change from passing two degrees.

Written by JEANNIE BARTLETT ’15 of Leyden, Mass., Co-President of the Socially Responsible Investment Club (SRI)